Food price inflation in China is booming well beyond the rate of the broader CPI.
The Chinese CPI zoomed 5.1%, year-over-year, in November. But food soared 11.7% for the same period.
What's that mean for Chinese tightening measures?
From Waverly Advisors (emphasis ours):
The consumer inflation narrative continues to pick up steam with food price pressure, particularly in the fresh vegetable and grain sub-segments, providing Beijing with ample justification for further tightening. We continue to anticipate further tightening measures by PBOC and regulators in the near-term and, in the intermediate-term, anticipate increased likelihood of direct market intervention in individual commodity markets.
But China did not choose to raise interest rates this weekend. They are aiming for 4% inflation in 2011, while maintaining 8% growth.
Maybe they're looking for another way to hit that inflation target other than raising rates. China's government is looking to limit loans to $1 billion in 2011. But with food the biggest part of the inflation problem, China is using a more unconventional tool, price controls, to quell the inflation surge.
Check out the 25 countries that would get slammed in a food crisis >
From Waverly Advisors:
